September 20, 2014
$24 Trillion Calls for Climate Policy
by Robert Kropp
In advance of next week's climate summit at the United Nations, a group of institutional investment
organizations representing 348 investors and $24 trillion under management call for climate
policies that encourage clean energy investment. First in a two-part series.
The next international climate conference is scheduled for Paris in December, 2015. However,
perhaps mindful of the track record of dismal failures in past negotiations, UN Secretary-General
Ban Ki-moon has organized a summit of world leaders at the organization's New York headquarters, to
be held next week. Climate activists also plan a massive rally in New York tomorrow, and associates
of the Occupy movement intend to disrupt Wall Street activities on Monday.
January, when Ceres hosted an Investor Summit on Climate Risk at
the UN, Christiana Figueres, Executive Director of the UN Framework Convention on Climate Change,
told reporters, “Policy at the international level is inevitable,” and added that governments are
stepping up their efforts to make the necessary reforms, even ahead of the 2015 deadline for doing
so established during the most recent climate conference held in Warsaw in 2013.
the fact that 348 institutional investors representing $25 trillion have signed the Global Investor Statement on Climate
Change, calling for appropriate government action to accelerate low carbon investment, such
optimism seemed noticeably absent during a press
briefing held on Thursday. Coordinated by four global investor groups on climate change—the Investor Network on Climate Risk (INCR), the Institutional Investors Group on Climate Change
(IIGCC), the Investor Group on Climate Change
(IGCC), and the Asia Investor Group on
Climate Change (AIGCC)—the briefing featured speakers who repeatedly underscored the urgency of
“We're not doing enough right now,” David Pitt-Watson, Chair of the UN Environment Programme Finance Initiative (UNEP
FI), said. “Despite the progress that has been made...governments need to act now if we are
going to solve this problem. We need stable, meaningful prices on carbon. We need elimination of
subsidies on carbon. And we need to regulate the finance industry so it can do its proper job,
which is to take our savings and invest them profitably in development that is sustainable.”
Anne Simpson, Director of Global Governance for California Public Employees’ Retirement System (CalPERS),
addressed the evolving nature of the concept of fiduciary duty, which many institutional investors
have claimed as justification for avoiding what they perceive to be risky low carbon investments.
“Thinking about the risks and opportunities that climate change pose...there's a market
failure that needs to be addressed,” Simpson said. “Carbon is not priced and subsidies are
distorting investment positions. If we don't get the market aligned with our fiduciary
responsibilities, we won't capitalize the investment that's needed into new opportunities like the
Clean Trillion that have
According to the International Energy Agency (IEA), $36 trillion in
global investment in clean energy will be required by 2050, a total which averages out to $1
trillion per year until then. At the Investor Summit in January, Ceres released a report detailing
ways in which institutional investors can help meet that goal.
“Capital markets have the
capital to finance a transition to a low carbon economy,” Frank Pegan, Chair of the IGCC, said at
the press briefing. “A carbon price will change the capital markets' ability to go from short-term
considerations to long-term sustainable outcomes, both for investors and the citizens of this
“Provided the risk and reward criteria which pension funds, insurance companies
and so on will require meet our normal objectives, low carbon transformation investments could
provide excellent long-term investment opportunities for institutional investors,” Donald
MacDonald, Chair of the IIGCC, added.
However, “We can no longer rely on our engagement
with policymakers to stimulate the speed of change that we need in order to protect the financial
returns of our portfolios,” Faith Ward, Chief Responsible Investment and Risk Officer, Environment Agency Pension Fund (EAPF), warned.
“Policymakers need to act now. Delay is not an option.”
Perhaps the most sobering
assessment came from Assaad Razzouk, Group Chief Executive of Sindicatum Sustainable Resources, a Singapore-based firm that
both invests in and operates clean energy projects.
“We're very much on the front lines of
climate change,” Razzouk said. “We see China decaying with its ecosystem permanently impaired. We
see India suffering from sea level rise, coastal erosion, land loss, precipitation decline, and
droughts. We see major cities like Bangkok and Jakarta at risk of not existing in 30 years.”
“Asia is in the process of roasting the planet,” he continued, “because Asia is in the process
of building some 1,000 coal fired power plants. The only reason these 1,000 coal fired power plants
can come on stream is because of the global capital markets and the lack of a carbon price, in
addition to the the fact that fossil fuel subsidies are absolutely rampant in Asia, to the tune of
approximately a trillion dollars a year.”
Noting how few Asian names appear on the
Statement on Climate Change, Razzouk concluded, “Engagement is incredibly weak from Asia.”
The Global Investor Coalition on Climate Change groups also launched the Low Carbon Investment
(LCI) Registry, which provides examples of global low carbon investments made by institutional
Next: Civil society groups urge UN Secretary-General to emphasize public
funding at Climate Summit, while social movements denounce “the corporate take-over” of the Summit.